The government is considering reducing gold and silver import duties to 6% from the current 15%, although no final decision has been taken.
Industry representatives say the higher levy has encouraged smuggling, even as official gold imports continued to rise after the May 13 duty hike.
Policymakers are also assessing the impact of high duties on silver and platinum, which are widely used in industries including solar energy, electronics, automobiles and healthcare.
Gold Duty U-Turn? Govt Mulls Cutting Import Tax From 15% To 6%
The government is weighing a sharp cut in gold and silver import duties after the 15% levy fuelled smuggling and widened the gap between legal and unofficial trade, sources said
Gold and Silver Bars
Summary
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The central government is assessing whether to reverse recent import duty hikes on gold and silver to curb smuggling and formalise the trade, three sources reported to Moneycontrol.
Industry representatives, comprising bullion traders and jewellers, are currently urging the administration to reduce the levy to 6 per cent from the existing 15 per cent.
Authorities had increased the duties to 15 per cent on May 13, 2026, aiming to protect dollar reserves. Policymakers have yet to reach a final decision on the proposed tax reduction, though a government official said that some departments are evaluating if a lower tax would deter smuggling and boost formal imports.
The Ministry of Finance did not respond to requests for comment regarding the potential policy shift.
Parallel Gold Trade Surges
Higher taxes have inadvertently fuelled a parallel economy by widening the price gap between official and unofficial imports.
India typically buys 700-800 tonnes of gold annually and exports finished jewellery to markets including the UAE, Thailand and Singapore.
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Following the May 13 increase, inbound shipments still rose nearly 34 per cent in May 2026. Gold imports subsequently grew 5.5 per cent to $6.13 billion across June and July 2026, compared with $5.81 billion during the corresponding period last year.
An industry source said that the tax hike caused a substantial increase in smuggling.
"The government wants to conserve dollars, but there was a significant outflow through the parallel economy," the source said. "The tax change just changed how much gold was imported legally."
Industrial Impact of Duties
The administration originally implemented the 15 per cent levy to defend foreign exchange buffers and manage the current account deficit. An 82 per cent surge in April 2026 gold imports and a 6 per cent year-to-date depreciation of the rupee by mid-May prompted that defensive move.
Current government discussions now extend beyond gold to include import levies on silver and platinum. While these precious metals command the same safe-haven demand as gold, they also see strong industrial usage across sectors.
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Maintaining elevated duties on these metals generates industrial input inflation. Silver remains a crucial component for solar energy and electronics manufacturing, while platinum is essential for the automobile and healthcare sectors.
The exact contours, timing and scope of any potential duty modifications remain uncertain, another industry source said.